Massachusetts commissioner of insurance, Linda Ruthardt, has defended her decision to seek a US receivership for the insolvent Bermuda insurer, Electric Mutual Liability Insurance Co. (EMLICO).

But she has argued that Bermuda law "appears to limit or prohibit removal of insolvent companies'' and that not even EMLICO's reinsurers indicate Bermuda authorities would take any action to allow EMLICO's return to Massachusetts, if it was proved that her decision to allow EMLICO to move to Bermuda was unlawful.

In court briefs filed with the state's Supreme Judicial Court, she said, "Indeed, the Bermuda authorities responded to a request to defer Bermuda proceedings by referring the commissioner to diplomatic channels. This point is emphasised by the reinsurers' lack of success in raising their claims of fraud in Bermuda.'' She further noted that even if her decision to allow EMLICO to leave Massachusetts for Bermuda was vacated by the court, it would still lead to parallel proceedings in both jurisdictions and negotiated roles for each receiver.

Ms Ruthardt noted that her proposed settlement agreement reflects just such an outcome "but without the likely passing of years and the expenditure of vast sums in legal fees before agreement with Bermuda is reached. In the commissioner's view, it is better to resolve the issues between the jurisdictions now than to litigate here while EMLICO is liquidated there.'' She further argued against the court deciding questions concerning the actions of the executive branch of government, especially in the absence of any challenge from a party with standing.

The commissioner also dismissed any suggestion that the term "state'' should only refer to a jurisdiction of the US, saying that it would prevent the common occurrence of transfers to and from the US, as provided for by the legislature.

Ms Ruthardt made the point that her proposed receivers' agreement has already been approved by the Bermuda Supreme Court and EMLICO's Bermuda liquidators.

She said, "The receivers' agreement substantially restores the situation as it would have been if EMLICO had remained in Massachusetts by repatriating material issues through a significant Massachusetts role in the compromise or litigation of environmental claims and in the resolution of all reinsurance disputes.

"The settlement thus avoids a protracted international dispute while protecting the many personal lines policyholders of EIC and the US insurer insolvency funds (and thus the public) from the effects of EMLICO's insolvency.

"The settlement achieves these significant benefits by giving the US receiver greater powers than would otherwise be the case respecting the United States liquidation of an alien insurer, and it is therefore in the public interest.'' COURTS CTS